Early this morning Germany published Q2 GDP which came in slightly higher than expected at 0.3% compared to 0.2%. This marginally beat the forecasts which has helped the Euro strengthen against both Sterling and the US Dollar in this morning’s trading session. However, as the rest of Europe continues to struggle I would anticipate that Germany will suffer towards the end of the year as overall European spending appears to be down.
European GDP year on year came in exactly as expected with negative growth of -0.4% and owing to the data being in line with forecasts this negative news has been overlooked in terms of the currency pairings of EURUSD and GBPEUR. Yesterday saw Greek GDP improve to -6.2% from -6.5% which shows that the austerity measures and cost cutting seems to be working but there’s still a long way to go before Greece gets back to where it needs to be in the long term. Italy also contracted last week by -0.7% and this is making life difficult for Mario Monti’s government to implement austerity and budget cuts as it attempts to avoid a bailout in the future.
Both Angela Merkel and Mario Draghi, two key figures within Europe, have both said they will do everything in their power to save the Euro and with the recent ECB action to lower Spanish and Italian borrowing costs this has seen a mild improvement for the Euro. However, to me it is only a matter of time before Europe has its next debt problem which seems to be constantly growing with no end in sight.
This morning we have seen a short term window for selling Euros into Sterling or US Dollars so if you’re thinking about making a decision feel free to contact me for further information email@example.com
Tomorrow see the Bank of England minutes which will show if any of the 9 members opposed Mervyn King’s recent comments that cutting interest rates was unnecessary. I think it’ll be a 9-0 whitewash in favour of keeping interest rates on hold.